Gold clinched a fresh record high — pushing closer to US$4,000 (45167.14) an ounce — as the US government shutdown and a political crisis in France injected more uncertainty into financial markets.
Bullion rose to US$3,977.44 an ounce after surging 1.9% on Monday. The suspension in federal operations that’s now stretching into a second week has deprived investors of key data needed to assess the health of the US economy, while the US Federal Reserve struggles to assess changing conditions.
Traders are still pricing in a quarter-point rate cut this month, which should benefit gold as it doesn’t pay interest.
In France, Sebastien Lecornu resigned as prime minister, after failed attempts to reach a consensus on budget spending with political parties, with the deadlock thwarting attempts to rein in the largest fiscal deficit in the euro area.
Meanwhile, Sanae Takaichi’s near-certain elevation as the next Japanese prime minister has also jolted financial markets.
See also: Why investors can’t seem to get enough of gold
The political shakeups in France and Japan are adding to fiscal concerns and contributing to the rally in gold, Nicky Shiels, head of research and metals strategy at MKS PAMP, said in a note. “A mix of retail (especially in Europe and Japan) and institutional inflows have driven” the latest surge, she said.
US President Donald Trump has set the scene for gold’s surge of around 50% this year, as his aggressive moves to reshape global trade and geopolitics spurred a flight to safety and a move away from the dollar.
Central banks and gold-backed exchange-traded funds have been enthusiastic buyers, while the Fed’s interest rate cut, and the prospect of more to come, has helped recently.
See also: Goldman Sachs sees more upside for gold on private interest
Spot gold rose 0.1% to US$3,964.02 an ounce as of 8.58am in Singapore, and is now on track for the biggest annual gain since 1979. The Bloomberg Dollar Spot Index was steady.
Chart: Bloomberg
